Nickel miner LionOre says becomes takeover target

The world’s 10th-largest nickel producer, LionOre , has become a takeover target as bigger firms crave its high-growth profile and special refining technology, a company official said on Tuesday.

LionOre, which has mines in southern Africa and Australia, will also probably become the only company whose main product is nickel following a wave of takeover activity.

“We are a target; we’re the only pure nickel play left on the market,” Peter Breese, managing director of African operations, told journalists in response to a question. “Whether we will be taken over, I don’t know.”

He declined to say if the firm had received takeover approaches.

Canada’s nickel producer Falconbridge was recently bought by Xstrata , while Brazilian mining group CVRD has made a takeover offer for Inco , which would remove the last pure nickel producer.

LionOre plans to nearly triple nickel production over the next six years to around 90,000 tonnes per year from 34,000 tonnes expected this year, with help from its Activox refining technology.

LionOre Mining International Ltd, which is listed in Australia, Canada and Britain, gave the green light recently to a $620 million project to build its first commercial Activox refinery in Botswana, which will nearly double production there to 22,500 tonnes a year.

Production is due to be launched in late 2009 at the refinery, which will dramatically cut cash costs to around $1.69 per lb from the current $2.50-$2.60, Breese said.

“At $1.69, we will definitely be the lowest cost (nickel) producer in the world,” he said.

Currently, LionOre’s output in Botswana is smelted at the BCL smelter in Botswana and shipped to Norway for refining.

Activox, which uses water leaching to extract the metal instead of heat as in conventional refineries, will increase nickel metal recovery to 95 percent from the current 73 percent and more than double cobalt recovery, he added.

The refinery also has the advantage of being environmentally friendly since it does not belch out smoke and other toxic fumes. A trial refinery has been running in Botswana for the past two years to iron out any problems.

LionOre is currently producing nickel in Botswana from its Phoenix orebody, but plans to switch to the adjacent and much larger Selkirk resource in 2018, extending the use of the Activox refinery until 2027 at the same production level of around 22,000 tonnes per year.

The company has a joint venture with South Africa’s African Rainbow Minerals on the Nkomati nickel mine, where a second commercial Activox refinery is due to be built. Output there is due to be ramped up to 22,000 tonnes per year from the current 5,000 tonnes by 2010.

LionOre is not interested in licensing the Activox technology, which gives it a competitive edge in the sector, but is seeking out joint ventures, Breese said.

“If they want the technology, then we will ask for a share in the action,” he said.